Americans are concerned about homeownership in response to the Tax Cuts and Jobs Act, according to new realtor.com® research. The legislation, awaiting President Trump’s signature (at press time), passed on Wednesday this week.
More than one-third (36.2 percent) of respondents to a realtor.com survey, conducted Dec. 18-19 prior to the passage, were “concerned” about being a homeowner; 17.2 percent were “very concerned.” Just one-quarter of respondents, roughly, felt “positive” or “very positive” about the doubled standard deduction, and only about half that (12.4 percent) felt “very positive” about the elimination of the second-home mortgage interest deduction (MID). The bill doubles the standard deduction, from $13,000 to $24,000 for married taxpayers and from $6,500 to $12,000 for single taxpayers, and removes the MID on second homes.
Additionally, the bill is motivating some to move quicker—or not at all. Almost 14 percent of respondents to the survey said they will list their home sooner, while 7.6 percent said they will hold off on their plans to sell. Close to 30 percent of respondents, meanwhile, said they will buy faster; 14.2 percent will buy a cheaper home; 12 percent will delay their plans to purchase; and 2.3 percent will house-hunt in another location.
Notably, 57.1 percent of respondents to the survey believed the legislation will not impact their plans to sell, and 22.9 percent believed it will not impact their plans to purchase.
The bill caps the MID on new loans for primary residences at $750,000—a cut from the existing $1 million, but higher than the $500,000 originally proposed by House Republicans. The bill also:
- Eliminates the MID for home equity loans, unless the funds go to home improvements;
- Limits the state and local income, property and sales tax deduction to $10,000
- Preserves the exclusion on capital gains on home sales
“The bill will have a significant impact on the housing market and overall economy, so it makes sense that people are wondering what it means to them,” says Joseph Kirchner, senior economist at realtor.com. “Some house hunters—particularly wealthy buyers—will see an increase in after-tax income, making an already tough housing market even more competitive. This increased demand could drive prices up even higher than they are already. And changes in the deductibility of mortgage interest and state and local taxes could cause challenges for many homeowners.”
Earlier this month, realtor.com Chief Economist Danielle Hale estimated homeowners in California, Maryland, New Jersey and New York would bear the brunt of the changes. California, especially—with its high prices—would be hard-hit.
“High housing costs in California [make] it the state with the third-highest average mortgage interest deduction, behind Hawaii and the District of Columbia,” said Hale. “…Lower-priced housing markets will also eventually be impacted.”
“While the impact of this bill may not be as harmful in many parts of the country, here in California, where the typical home costs two-and-a-half times the national home price, homeowners and would-be buyers will be hit especially hard,” said California Association of REALTORS® (C.A.R.) President Steve White following the passage.
The National Association of REALTORS® (NAR) acknowledged the positives in its own statement.
“The final tax reform bill is far from perfect, but it’s been greatly improved for homeowners over previous versions,” said NAR President Elizabeth Mendenhall in a statement. “REALTORS® should be proud of the good work they did to help get us here. We generated over 300,000 emails to members of Congress through two calls for action and held countless in-person meetings with legislators, all of which helped shape the final product.
“The results are mixed,” Mendenhall said. “We saved the exclusion for capital gains on the sale of a home and preserved the like-kind exchange for real property. Many agents and brokers who earn income as independent contractors or from pass-through businesses will also see a significant deduction on that business income. Despite these successes, we still have some hard work ahead of us. Significant legislative initiatives often require fixes to address unintended consequences, and this bill is no exception.
“The new tax regime will fundamentally alter the benefits of homeownership by nullifying incentives for individuals and families while keeping those incentives in place for large institutional investors,” Mendenhall said. “That should concern any middle-class family looking to claim their piece of the American Dream.”
More than 2,300 participated in the realtor.com survey.
Stay tuned to RISMedia for more developments.
For the latest real estate news and trends, bookmark RISMedia.com.
The post Americans ‘Concerned’ About Homeownership in Light of Tax Bill appeared first on RISMedia.
Source: RisMedia Feed